|
February 2006 |
|||||||||||||||
|
Editor's Note: We're trying a new idea at Debt Matters — testimonials from people who made the uphill climb out of debt. These are true stories, but all names have been changed for the sake of privacy. Saving Stories: How I Got Out from Under a $35,000 Debt
Sometimes you can dig yourself out of debt with a shovel. Other times you must claw your way out with your bare hands. Lisa's story is an example of the latter — fighting your way out of debt through shear will and sacrifices.Lisa was 27, living a very social single life in Miami. Like most 20-somethings, she had little savings. Like most 20-somethings, she spent money on $9 martinis, shopping, restaurants and clubs. Unfortunately, through her student loans, a car accident and her high-priced lifestyle, she also had racked up a total of $35,000 in debt. She did have two things on her side: She was a college graduate and now loathed her debt. "On my 26th birthday I realized that there was no way to pay off my debt and that I was sinking quicker and quicker," she said. "I was desperate and really worried that I had wasted a lot of money in my 20's and that I would do the same in my 30's. And since I was single, I thought if something happened to me or my job, I wouldn't be able to survive. I really started to fear being broke, not able to pay my bills and working for the rest of my life to pay off things I don't even remember buying." Lisa re-evaluated her situation and began to make changes, including committing to doing whatever it takes to become debt free or close by 30. She consolidated her credit cards at a lower interest rate so that her total debt payment was $560 each month, which would get her out of debt in a few years. But how would she pay for that living alone on $38,000? "I thought about bankruptcy but that seemed to be a short term fix," she said. "I realized that I needed to change my ways and get smart financially." The first step was to increase her income. She landed a new job outside Atlanta that paid $42,000. Not a big increase, but the salary was not the only thing Lisa was thinking about. Her brother and his family lived there. To save money, Lisa moved in with her brother and sister-in-law rent free in exchange for assistance with their toddler and new-born. Because her job was near her brother's home, she sold her car and canceled her car insurance. She found various ways to travel to and from work including rides offered by her family, friends and co-workers. She also walked or rode her bike when possible. In just a short while, she had gone from a very expensive lifestyle to one where she had almost no expenses. She set a monthly budget, began contributing money to the company 401(k) and started an emergency savings fund. Instead of spending money on going out to restaurants and clubs, Lisa and her new friends would take turns hosting dinner parties, each contributing to the dinner. Lisa also allocated a portion of her budget to shopping, rather than giving it up completely. In just two years, Lisa had a positive net worth. She had saved $2,000 in a money market and paid off the consolidation loan. Reaching her goal but wanting to continue, she kept her expenses in check. She purchased a car with 180,000 miles on it. She then moved into an apartment in downtown Atlanta. Lisa continued finding success in her career, landing a job that paid $62,000 at age 29. But she continued to save, increasing her 401k savings and her emergency fund. Today, she's 35, married to another saver and they are well on their way to financial freedom. And although she could afford it easily, she has yet to buy a new car. "I can get by with an old car," she says. "Basically, the joy from a new car doesn't compare to watching my money earn interest. I don't want to work for the rest of my life." |
|
|
|
|
|||||||||||
